Black Monday, Globalization and Trading Behavior of Stock Investors

19 Pages Posted: 21 Jun 2016

Date Written: 2016

Abstract

Using a simple sign test, we report new empirical evidence, taken from both the US and the German stock markets, showing that trading behavior substantially changed around Black Monday in 1987. It turned out that before Black Monday investors behaved more as in the momentum strategy; and after Black Monday more as in the contrarian strategy. We argue that crashes, in general, themselves are merely a manifestation of uncertainty on stock markets and the high uncertainty due to globalization is mainly responsible for this change.

Keywords: Trading behavior, Momentum, Contrarian, Black Monday, Globalization, Uncertainty

JEL Classification: C12, G02, G11

Suggested Citation

Kurz-Kim, Jeong-Ryeol, Black Monday, Globalization and Trading Behavior of Stock Investors (2016). Bundesbank Discussion Paper No. 18/2016. Available at SSRN: https://ssrn.com/abstract=2798536

Jeong-Ryeol Kurz-Kim (Contact Author)

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

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